Westpac chairman tips more lending uncertainty

Westpac
Banking Corp chairman and economist
Ted Evans
said the economic recovery would be moderate in the short term and the timing of any upswing in business lending was uncertain.

In a rare public comment, Mr Evans said the economy was in good shape “supported by sound fundamentals and robust growth in Asia.

“However, growth is expected to remain modest and uneven, with some sectors performing more strongly than others, and this will contribute to consumers and businesses remaining cautious in the near term." The comments from the former federal Treasury secretary were made in a letter issued to Westpac shareholders yesterday.

Mr Evans said the bank expected confidence to gradually improve and eventually lead to some increase in activity and a rise in lending growth.

“That said, the recovery is likely to be moderate in the short term, particularly as the timing of an upturn in business credit remains uncertain."

Banks have been struggling to grow their revenues over the past year, as households and businesses pay down debt and borrow less.

Total credit provided to the private sector by financial intermediaries rose 0.3 per cent in May, after being flat in April, to be a modest 3.1 per cent higher over the 12 months.

Business credit, which showed tentative signs of a recovery in February and March before falling in April, rose by just 0.1 per cent in May.

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“Within this environment Westpac is well placed; the significant investment in our networks and our people in recent years has seen all our divisions in solid shape," Mr Evans said.

In the letter, which was co-authored by chief executive
Gail Kelly
, Mr Evans said the strategy of deepening customer relationships and improving the sale of wealth products was achieving success.

“Retention of customers is also excellent," he said. “Overall, we believe the group is in a strong position to deal with the challenges of the environment and to continue delivering quality returns for shareholders."

Mr Evans, who is to step down from his position at the bank’s annual general meeting in December, said his successor,
Lindsay Maxsted
, was “enormously experienced and capable".